Near the end of June, billionaire Ricardo Salinas Pliego tweeted that his bank was working toward becoming the first Mexican lender to accept cryptocurrency. His news caused the price of bitcoin to climb to $34,805.19 that next Monday, up 8% from where it stood at 5 p.m. ET Friday. And it caused this financial blogger to wonder if this is just the beginning? How long will it be until all lenders are accepting and using cryptocurrency?
Hours after his initial tweet, Ricardo Salinas Pliego tweeted again in Spanish saying, “I think that any investor should start learning about cryptocurrencies and their future. At @BancoAzteca we are working to bring them to our clients.” And I thought that this was great advice for lenders as well. If cryptocurrency really is in our future, it might be time to learn a little more about it.
So, what exactly is cryptocurrency anyway? Cryptocurrency is a digital currency, or form of payment, that can be used to buy goods and services online. The currencies are often called tokens and behave a lot like arcade tokens or casino chips. You exchange real money for the cryptocurrency and then use the cryptocurrency to purchase a good or service. You can also exchange the cryptocurrency back for real money, like cashing in your chips.
Cryptocurrencies work using a technology called blockchain. A blockchain is essentially a digital ledger of transactions that is duplicated and distributed across an entire network of computer systems on the blockchain. Each block in the chain contains transactions. And every time a new transaction occurs on the blockchain, a record of that transaction is added to every participant’s ledger. This creates a decentralized database that is managed by multiple participants. It also records information in such a way that it is extremely difficult, almost impossible, to change, hack, or cheat the system, making blockchain incredibly secure. Secure sounds good.
More than 10,000 different cryptocurrencies are traded publicly, according to CoinMarketCap.com. And that number continues to rise. In May, the total value of all cryptocurrencies was more than $1.7 trillion! That’s a lot of arcade tokens! Bitcoin is currently the leader of all the crypto coming in at $735.5 billion. Some of the other major players are Ethereum ($324.2 billion), Tether ($61 billion), Binance Coin ($57.5 billion), Cardano ($54.6 billion), XRP ($46.5 billion), and Dogecoin ($44 billion). I don’t know about you, but I had no idea there were so many types of cryptocurrencies out there. Before doing research for this article, I’d only heard of Bitcoin and Dogecoin.
There are a variety of reasons why people are flocking to cryptocurrencies, but here are the heavy hitters:
Short answer, it depends on where you are. Cryptocurrencies are definitely legal in the United States, but China has basically banned them. Each country has its own policy, and those policies are likely to change over time.
Only time will tell. The first cryptocurrency, Bitcoin, was created back in 2009 by so-called Satoshi Nakamoto. And in a little more than ten years, more than 10,000 different cryptocurrencies are now traded publicly. That’s quite the growth and it appears that it is only going to keep growing. Plus, if Ricardo Salinas Pliego can really get Banco Azteca to begin accepting cryptocurrency, and get the Mexican government to let them, the rise of other institutions using cryptocurrencies could skyrocket. Again, only time will tell.
As with all financial trends, it’s good to keep an eye on cryptocurrency. If it truly becomes the currency of the future, you don’t want your institution left in the past. Here at GOLDPoint Systems, we are keeping up with all the latest and greatest trends and work hard to make sure our clients are too. Want to learn more about GOLDPoint Systems and how we help lenders grow? Visit our website or schedule a free demo.